Half Yearly Report

RNS Number : 6283R

Boot(Henry) PLC

26 August 2010

 

HENRY BOOT PLC

 

HALF-YEARLY RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2010

 

Henry Boot PLC, the land promotion, property development and investment, construction and plant hire business, today announces its Half-yearly Results for the six months ended 30 June 2010.

 

HIGHLIGHTS

 

Trading profits* of £5.8m (2009: £3.7m)

 

Revaluation surplus on investment properties of £1.7m (2009: deficit £23.6m)

 

Profit before tax of £9.0m (2009: loss £20.3m)

 

Basic earnings per share of 5.0p (2009: loss per share 11.8p)

 

Increased interim dividend of 1.35p (2009: 1.25p)

 

Net asset value per share of 136p (31 December 2009: 135p)

 

Net debt further reduced to £25.0m (31 December 2009: £32.1m)

 

The Group was awarded five prestigious National Site Awards from the Considerate Constructors Scheme and the RoSPA Gold Award for Occupational Health & Safety.

 

\* Trading profits are defined as profit from operations less profit on sale of investment properties and changes in the fair value of investment properties.

 

John Reis, Chairman, Henry Boot PLC commented:

 

I am pleased to report an improving performance during the Half-year ended 30 June 2010. The property market has seen some recovery from its low point in mid 2009, however market conditions remain challenging and we do not envisage these will change markedly in the near future.

 

We continue to believe that the housing land recovery will be concentrated on high quality green field sites, as has been the case in the past year and, notwithstanding the challenging planning environment, we are confident that our portfolio of opportunities is focussed in just that market segment.

 

Undertaking property development remains a very difficult challenge, however, the more stable property market witnessed in the first Half-year is encouraging. Whilst current trading remains reasonably robust we are very mindful that the well publicised spending cuts will have an impact on the level of work being put to the market as a whole. We have acted quickly to reduce our cost base and are confident that we can trade through these anticipated challenges satisfactorily.

 

Overall the Group continues to trade in line with the Board's expectations for the year ending 31 December 2010. Our debt level remains low and we retain a significant number of land and development opportunities which remain capable of generating excellent profits as markets improve.

 

For further information, please contact:

 

Henry Boot PLC

Jamie Boot, Group Managing Director

John Sutcliffe, Group Finance Director

Tel: 0114 255 5444

www.henryboot.co.uk

 

Evolution Securities Limited

Joanne Lake

Tel: 0113 243 1619

 

Citigate Dewe Rogerson

Fiona Tooley

Mobile: 07785 703523

Tel: 0121 362 4035

 

CHAIRMAN'S HALF-YEARLY REVIEW

 

RESULTS

 

I am pleased to report an improving performance during the Half-year ended 30 June 2010. The property market has seen some recovery from its low point in mid 2009, however market conditions remain challenging and we do not envisage these will change markedly in the near future.

 

Income Statement

Although revenue was lower at £55.1m (2009: £67.0m) after reduced property trading income and construction activity, trading profit increased by 56% to £5.8m (2009: £3.7m) helped by a reduction in the trading losses within land development and reduced central costs, offset by lower returns in the construction business. Administration and pension costs at £6.7m were marginally lower than 2009's £6.8m. The major change within the Income Statement compared with 2009 is that the Half-year external valuation of property, carried out by Jones Lang LaSalle, gave rise to a surplus of £1.7m (2009: £23.6m deficit). We have seen investment values slowly recover since mid 2009 and took advantage of strong demand for prime product to sell our South Shields investment property, generating a profit on disposal of £2.4m. More recently, the market has settled down and we believe that values now more closely reflect longer term fundamentals. Net interest costs were £1.1m (2009: £0.5m) arising from higher rates this year on lower average debt arising from the banking facilities renegotiated in May 2009. Profit before tax was £9.0m (2009: loss £20.3m) and retained profits were £7.4m (2009: loss £14.5m) giving rise to basic earnings per share of 5.0p (2009: loss per share 11.8p).

 

Statement of Financial Position

In overall terms the Statement of Financial Position line items are broadly unchanged from December 2009.

 

Non-current assets reduced to £208.1m (December 2009: £216.1m) after the disposal of the investment in South Shields. Current assets increased to £92.5m (December 2009: £84.8m) following further investments in land inventories and a £1.8m asset held for resale over the period end which was previously classified within investment properties. Current liabilities were down 5.2% to £85.3m (December 2009: £90.0m) with higher trade creditors within our construction division offsetting a £6.9m reduction in current borrowings.

 

As we continued to carefully manage our asset positions and generate cash over the period, the above changes resulted in net current assets of £7.2m compared with net current liabilities of £5.1m at December 2009 and £29.7m at June 2009. Net debt at 30 June was £25.0m (December 2009: £32.1m) with gearing of 14.1% (December 2009: 18.2%) and we continue to trade well within our banking facilities and covenants. Within non-current liabilities, defined benefit pension liabilities under IAS19 increased to £32.0m (December 2009: £25.7m) after long term gilt yields tightened to increase the scheme liabilities resulting in an overall increase to £38.3m (December 2009: £34.7m). Net assets stood at £177.0m (December 2009: £176.2m) after retained earnings in the period were offset by the net increase in the IAS 19 pension deficit and dividends paid.

 

Cash Flows

Operating cash inflows before movements in working capital were £7.7m (2009: £5.7m). Investment in land inventories of £2.8m and higher receivables at £3.4m reduced cash generated from operations to £2.2m. Net interest and taxation payments were £3.1m resulting in net cash outflows from operating activities of £0.9m. Cash inflows from investing activities of £10.6m (2009: £6.1m outflow) resulted from the disposal of property, plant and equipment of £0.7m and investment property of £11.8m, the latter including the South Shields property. After dividend payments to equity, preference and non-controlling interests of £2.6m, net debt was reduced by £7.1m during the period under review.

 

Dividend

After making good progress on debt reduction and seeing some stability return to the markets in which we operate, the Directors have declared an increased interim dividend of 1.35p per share (2009: 1.25p), which will be paid on 28 October 2010 to shareholders on the Register at the close of business on 8 October 2010.

 

REVIEW OF ACTIVITIES

 

Land

Hallam Land Management, our land promotion business continues to promote its extensive portfolio of opportunities throughout the UK. At 30 June 2010 we held interests in 8,162 acres (December 2009: 7,933 acres) with 1,580 acres owned (December 2009: 1,679 acres), 3,995 acres optioned (December 2009: 4,117 acres) and 2,587 acres under agency agreements (December 2009: 2,137 acres). The inventory value of these assets was £54.9m (2009: £54.6m) with a geographical bias towards land locations in the Midlands, South and West of England and Scotland.

 

We achieved several planning successes in the first half of 2010 with permissions secured on sites at Rugby (36 units), Bishopbriggs (32 units), St Albans (150 units), Countesthorpe (150 units), Kettering (275 units) and Winsick (54 units). Some of these sites, together with our Buckingham site (700 units) which received permission at the end of last year, will be available for sale during the second half of this year or into 2011. We made three small disposals in the period at Fylde, Mansfield and Worcester which gave rise to the segment revenue of £4.0m (2009: £1.6m). The prices achieved so far this year have shown an improvement on the lows seen in early 2009 but remain some way below the peaks achieved in 2007 and early 2008. We were refused planning permission at Bolsover, where we are considering our future options, and had appeals dismissed on sites at Ashby-de-la-Zouch and Crowmarsh Gifford.

 

Housing and housing land markets are likely to remain challenging whilst mortgage availability is restricted and general economic conditions remain uncertain but demand for our green field sites has remained resilient throughout the period and land and house prices have stabilised due to the relative lack of supply. Towards the end of the period the new Coalition Government announced that it intends to introduce a radical shake-up of the planning system, transferring primary responsibility for the allocation of sufficient land for housing from Central Government to individual local planning authorities. Until the new system is formally introduced and bedded in, which will take some time, there is likely to be uncertainty with regard to the number of new sites successfully brought through the planning system. We have already seen Regional Spatial Strategies abandoned, resulting in many local authorities questioning whether they need to continue with their Local Development Framework preparations or, at the very least, consider reducing the amount of land to be allocated for housing. It remains to be seen whether local planning authorities will be sufficiently resolute to deliver the significant amounts of land which are required by the housebuilding industry to fulfil the Country's long term needs.

 

Despite the considerable uncertainty now being created within the planning system, we are confident that our land bank should produce a good supply of new sites for disposal. We have submitted planning applications on sites at Edinburgh, Stratford, Stafford, Irthlingborough, Milton Keynes, Tillicoultry, Sheffield, Bedford and Exeter during the period. Furthermore, we are preparing applications on sites at Leicester, Marston Moretaine, Market Harborough, Kilmarnock and Chatteris, all of which are likely to be submitted later this year or into 2011.

 

Developments and investments

The property investment and development markets have seen continued stability with some recovery in prime asset values during the first half of the year. We also continue to hold a portfolio of development opportunities and have been working hard to restructure these arrangements to allow them to commence in the current market. Taking the investment properties first, activity in the period has been as follows:

 

·;	South Shields - The early part of the year saw a continued improvement in the values of prime investment properties. We took advantage of this by selling our open A1 non-food retail scheme in South Shields to Royal London Mutual Insurance Society Limited for £11.5m (December 2009 external valuation: £9.0m).
·;	Ayr - The town centre retail market has remained challenging but the quality of this centre's lettings has helped trading conditions for its retailers to improve through the period. The assignment of the former Au Naturale unit to a new retailer undoubtedly assisted, whilst footfall and car park usage have continued to grow with net car park income now materially up on last year. This being said, there continues to be a number of vacant units in the scheme and negotiations are ongoing with retailers to take this space, although we will only agree terms where they achieve increases in the scheme's capital value after the costs of the lettings have been taken into account.
·;	Nottingham - The Axis, our mixed use investment in the city centre, has remained fully let throughout the period and was our best performing asset in the half year revaluation with an 8% increase. We see this as a long term hold within the investment portfolio and expect to see decent uplifts at the next round of rent reviews.
·;	Bromley - Progress has been made on securing additional retailers for the remaining retail space in the scheme with two units let to Brighthouse and another now in legals. Of the two remaining units, we are close to agreeing terms and once this is done we will consider fitting out the remaining unit to make it a more attractive letting prospect. We continue to have vacant office space and with the office occupier market remaining weak, we are considering securing planning permission for alternative uses to maximise value.
·;	Port Talbot - Poundstretcher has taken the last vacant unit at our 23,000 sq ft retail warehouse development. This fully let investment is now being marketed for sale with a good level of interest being received. It is hoped that a sale will be concluded in due course.
·;	Rotherham - We continue to market the 100,000 sq ft retail warehouse development anchored by a 50,000 sq ft B&Q, although we will not undertake the second phase of 50,000 sq ft of retail warehousing until we can secure occupiers on profitable terms. Terms have been agreed with two occupiers to lease the 10,000 sq ft of industrial space and a good level of interest has been received on the four acres of industrial land forming part of the development.
·;	Stop 24 - This, our Motorway Service Area on the M20 just before the Channel Tunnel rail link, has seen a renewed effort concentrating on securing a range of new lettings in the scheme, including a 110 space lorry park development which is due to commence on site in the Autumn. Various other initiatives are also underway to improve the footfall and these are bearing fruit with material increases in visitor numbers year on year. These initiatives are vitally important so that we can secure the type of tenants we believe our scheme deserves and needs to have to be as successful as it should be.
	Within the development portfolio, work has continued to progress all the development sites we hold and key events occurring in the period are noted below:
·;	Markham Vale - During the period under review we achieved the unconditional exchange of contracts to develop a 15,000 sq ft industrial unit for a regional engineering company on our 200 acre regeneration site near Chesterfield. Work on the development is now 90% complete and remains on target and budget. We also completed the letting and sale of three of the five remaining speculatively built industrial units and agreed terms on one of the two units left. It is pleasing to see that occupier interest in Markham Vale remains strong despite the economic downturn and further lettings and design & build contracts are currently under negotiation.
·;	Priory Park - Negotiation of the new planning permission for the final 16 acres at Priory Park, Hull, has progressed well with almost all matters now agreed and the permission is expected early in the Autumn. This will allow interest from prospective office and industrial occupiers for the balance of the site to be progressed. In the meantime, the sale of two serviced plots has been agreed, with one completed prior to the period end. Of the remaining two speculative build industrial units vacant at the end of 2009, one has now been sold and terms are almost agreed for sale of the other.
·;	Richmond-upon-Thames - Detailed planning permission for our 20,000 sq ft town centre office development has now been granted and full marketing of the scheme is underway. We have already been shortlisted by one party who is seeking to occupy the whole building and, with the lack of any comparable well located office development in the town, we are confident that we will secure a suitable occupier for the development in due course.
·;	Warminster - Good progress is being made with our supermarket development. Detailed planning consent for the 25,000 sq ft scheme has been secured and a pre-let to Waitrose has been agreed. Work is expected to commence on relocating the existing site occupier in September 2010 and the supermarket is planned to be trading by Christmas 2011.
·;	Beeston - Plans for the redevelopment of our existing 70,000 sq ft town centre retail investment are progressing slowly but we continue to work towards finalising an agreement with Broxtowe Borough Council. If, in the near term, we consider matters are not going to progress as we anticipated, we intend to turn our attention to the alternative refurbishment of the existing investment since there is a strong level of interest from existing and new retailers for both the redevelopment or the refurbishment proposals.
·;	Mansfield - Sandlands Court, completed at the beginning of the year, is now fully let and trading well. Terms were agreed for the sale of this retail investment by the half year and the transaction has subsequently completed.
	York - Our remaining investment property interest at Clifton Moor comprises a former 18,000 sq ft nightclub for which planning consent has been secured for retail warehouse use. We have received some occupier interest in the property in the period and are hopeful that terms will be concluded with an occupier before the end of the year.

 

Construction

Our Construction division continues to perform well. Henry Boot Construction carried a strong order book into 2010 and activity levels have remained high in the first half of this year. The Social Housing sector continues to provide opportunities with works being carried out for Rotherham, Doncaster and Barnsley under their Decent Homes investment programmes. Once again we have completed repairs or refurbishment on over 3,000 dwellings during the last year. Our position in this market was also strengthened with the award of two major contracts for the Eastland Homes Partnership in Manchester and North Lincolnshire Homes. In addition, we have been awarded the first new build council house scheme in Sheffield for over 20 years. Notably this contract has recently won the RIBA Housing Design 2010 Award.

 

We have also been appointed to the Sheffield Teaching Hospitals NHS Foundation Trust framework and are currently delivering three schemes at the Northern General Hospital. We continue to deliver education schemes, mainly primary schools, for Rotherham, Cheshire, North-East Lincolnshire and Derby Councils under various framework arrangements. Our framework agreement with the National Offender Management Service also saw further prison projects being carried out at establishments throughout our operating area. However, like others in the sector, we anticipate a further reduction in public sector opportunities following the Comprehensive Spending Review in October 2010 so we focused on continuing to increase our private sector client base. As part of this drive we have carried out building works for Symphony Kitchens, British Land, Veolia, Outokumpu, Betafence, Corus, Valbruna and for our sister company, Henry Boot Developments.

 

Pleasingly, we received five prestigious National Site Awards from the Considerate Constructors Scheme and were awarded the RoSPA Gold Award for Occupational Health & Safety during the reporting period. These awards are testimony to the hard work that all our employees on site put into managing relationships with clients and tenants to minimise the impact our construction works have on individuals and the local community. It is also a crucially important factor in the bidding process to demonstrate clearly that we do not pay lip service to being a considerate constructor.

 

Road Link A69 has continued to perform in line with expectations and previous years. Following the retirement of Douglas Greaves, Jamie Boot, the Group's Managing Director, and Simon Carr, Managing Director of Henry Boot Construction, have been appointed to the Road Link Board to oversee the ongoing activities on behalf of the Group.

 

Banner Plant has recorded satisfactory figures for the period, with the strategy remaining as set out in 2009; the core elements being cost control, fleet realignment and positive cash flow. Trading was hampered in January and February by the worst winter weather for many years but since then we have experienced more positive demand. At the end of February 2010 turnover was 12% down when compared to that of 2009, but this shortfall had been eliminated by the end of June. Total overheads were reduced by 5%, with notable reductions in depreciation, down 13%, salaries down 10% and wages down 2%. Fleet realignment continued, balancing the need for a modern product offering to reflect current demand and cash flow needs. The more stable trading conditions allowed some investment during the period, with a focus on powered access, mini excavators, rollers and accommodation units. Overall, the original cost of the fleet has been reduced 3.5% with cash flow remaining positive, although the recent announcements regarding spending cuts mean that we will continue to adopt a cautious strategy for the remainder of the year.

 

OUTLOOK

 

Overall, the Group continues to trade in line with the Board's expectations for the year ending 31 December 2010. The prospects for each of our three business segments for the remainder of 2010 are detailed below.

 

Land 

At this time last year I indicated that nationally there were likely to be fewer houses built than for the previous 20 years and this trend is continuing. The lack of speed within the planning process and more recently the increased uncertainty that has been introduced by the election of a coalition Government is undoubtedly a restriction on our business, but we remain confident that we have a portfolio of good quality sites that will create a decent level of activity for the foreseeable future. We continue to believe that the housing land recovery will be concentrated on high quality green field sites, as has been the case in the past year and, notwithstanding the challenging planning environment, we are confident that our portfolio of opportunities is focused in just that market segment.

 

Developments and Investments

Undertaking profitable property development remains a difficult challenge. The more stable property market witnessed in the first Half-year is, however, encouraging and, combined with the continual push to drive down construction related costs and improve the value of schemes through planning and tenant initiatives, will slowly begin to make development risks and rewards acceptable. We are increasingly working with local authorities and other land owners who are keen to see development take place but recognise that, in order to do so, they will have to take a more realistic view on land values.

 

Construction

Whilst current trading remains reasonably robust, we are mindful that the well publicised spending cuts will have an impact on the level of work being put to the market as a whole. We are still seeing opportunities within both the private and public sectors, although it is anticipated that margins will have to be tight to win that work. In anticipation of this, we have acted quickly to reduce our cost base and are confident that we can trade through these anticipated challenges satisfactorily.

 

Group risks and uncertainties

The Directors set out the key risks that could have a material impact on the results in the 2009 Annual Report and Financial Statements (and reproduced in Note 10 in this Half-yearly report). The Board does not consider that these risks, which were identified at that time, have changed materially since then. The change in Government and the coalition's stated aim to reduce spending, raise taxes and cut our Country's debt will serve to reduce the level of demand in the economy generally and, in particular, impact on the level and number of construction projects available to us. The Government has also indicated that it will implement substantial changes to the planning regime which adds additional business uncertainty until the new system is fully adopted. On the positive side, our debt level remains low and we retain a significant number of land and development opportunities which remain capable of generating excellent profits as markets improve.

 

 

John Reis

Chairman

25 August 2010

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

For the half year ended 30 June 2010

 

	Half year ended 30 June 2010 Unaudited £'000			Half year ended 30 June 2009 Unaudited £'000		Year ended 31 December 2009 Audited £'000
Revenue	55,076			66,983		116,524
Cost of sales	(42,615)			(56,445)		(88,625)
Gross profit	12,461			10,538		27,899
Other income	12			16		29
Administrative expenses	(5,619)			(5,038)		(12,858)
Pension expenses	(1,050)			(1,787)		(3,611)
	5,804			3,729		11,459
Increase (decrease) in fair value of investment properties	1,727			(23,585)		(22,381)
Profit on sale of investment properties	2,519			74		878
Profit (loss) from operations	10,050			(19,782)		(10,044)
Investment income	228			625		803
Finance costs	(1,313)			(1,148)		(2,651)
Profit (loss) before tax	8,965			(20,305)		(11,892)
Tax	(1,558)			5,840		5,926
Profit (loss) for the period from continuing operations	7,407			(14,465)		(5,966)
Other comprehensive income:
Revaluation of Group occupied property	-			206		(44)
Deferred tax on property revaluations	-			(224)		80
Tax on realised surplus	-			-		391
Actuarial loss on defined benefit pension scheme	(6,488)			(3,252)		(1,595)
Deferred tax on actuarial loss	1,817			911		447
Movement in fair value of cash flow hedge	(22)			40		65
Deferred tax on cash flow hedge	210			-		-
Other comprehensive income for the period	(4,483)			(2,319)		(656)
Total comprehensive income for the period	2,924			(16,784)		(6,622)
Profit (loss) for the period attributable to:
Equity holders of the Parent Company	6,535			(15,244)		(7,389)
Non-controlling interests	872			779		1,423
	7,407			(14,465)		(5,966)
Total comprehensive income attributable to:
Equity holders of the Parent Company	1,979			(17,579)		(8,070)
Non-controlling interests	945			795		1,448
	2,924			(16,784)		(6,622)
Basic earnings per ordinary share for the profit attributable to equity holders of the Parent Company during the period	5.0p			(11.8)p		(5.7)p
Diluted earnings per ordinary share for the profit attributable to equity holders of the Parent Company during the period	5.0p			(11.8)p		(5.7)p
Dividend	1.35p			1.25p		2.5p

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

at 30 June 2010

 

	30 June 2010 Unaudited £'000	30 June 2009 Unaudited £'000	31 December 2009 Audited £'000
Assets
Non-current assets
Intangible assets	12,211	13,137	12,684
Property, plant and equipment	15,729	18,622	16,203
Investment properties	164,570	189,808	172,290
Trade and other receivables	2,601	1,286	3,743
Deferred tax assets	12,986	10,574	11,131
	208,097	233,427	216,051
Current assets
Inventories	58,353	59,406	55,433
Trade and other receivables	28,450	28,866	25,071
Cash and cash equivalents	3,867	3,334	4,305
Assets classified as held for sale	1,792	-	-
	92,462	91,606	84,809
Liabilities
Current liabilities
Trade and other payables	56,434	55,140	51,971
Current tax liabilities	1,988	3,866	2,820
Borrowings	24,236	50,868	31,163
Provisions	2,623	11,414	4,004
	85,281	121,288	89,958
Net current assets (liabilities)	7,181	(29,682)	(5,149)
Non-current liabilities
Trade and other payables	1,583	3,614	3,734
Borrowings	4,650	5,813	5,231
Employee benefits	32,028	25,888	25,732
Deferred tax liabilities	12	135	5
Provisions	-	20	-
	38,273	35,470	34,702
Net assets	177,005	168,275	176,200
Equity
Share capital	13,424	13,424	13,424
Revaluation reserve	3,314	3,542	3,349
Retained earnings	156,824	147,719	156,200
Other reserves	2,714	2,615	2,599
Cost of shares held by ESOP trust	(476)	(669)	(602)
Equity attributable to equity holders of the Parent Company	175,800	166,631	174,970
Non-controlling interests	1,205	1,644	1,230
Total equity	177,005	168,275	176,200

 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

at 30 June 2010

 

			Attributable to equity holders of the Parent Company
			Share capital	Revaluation reserve	Retained earnings	Other reserves	Cost of shares held  by ESOP  trust	Total	Non-controlling interests	Total equity
			£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 January 2009			13,424	4,438	168,868	2,577	(764)	188,543	1,557	190,100
(Loss) profit for the period			-	(878)	(14,366)	-	-	(15,244)	779	(14,465)
Other comprehensive income			-	(18)	(2,341)	24	-	(2,335)	16	(2,319)
Total comprehensive income			-	(896)	(16,707)	24	-	(17,579)	795	(16,784)
Equity dividends			-	-	(4,846)	-	-	(4,846)	(708)	(5,554)
Transfer to retained earnings			-	-	(14)	14	-	-	-	-
Share-based payments			-	-	-	-	95	95	-	95
Arising on employee share schemes			-	-	418	-	-	418	-	418
			-	-	(4,442)	14	95	(4,333)	(708)	(5,041)
At 30 June 2009 (unaudited)			13,424	3,542	147,719	2,615	(669)	166,631	1,644	168,275
At 1 January 2009			13,424	4,438	168,868	2,577	(764)	188,543	1,557	190,100
(Loss) profit for the period			-	(1,410)	(5,979)	-	-	(7,389)	1,423	(5,966)
Other comprehensive income			-	427	(1,148)	40	-	(681)	25	(656)
Total comprehensive income			-	(983)	(7,127)	40	-	(8,070)	1,448	(6,622)
Equity dividends			-	-	(6,464)	-	-	(6,464)	(1,775)	(8,239)
Transfer to retained earnings			-	(106)	124	(18)	-	-	-	-
Share-based payments			-	-	-	-	162	162	-	162
Arising on employee share schemes			-	-	799	-	-	799	-	799
			-	(106)	(5,541)	(18)	162	(5,503)	(1,775)	(7,278)
At 31 December 2009 (audited)			13,424	3,349	156,200	2,599	(602)	174,970	1,230	176,200
Profit for the period			-	-	6,535	-	-	6,535	872	7,407
Other comprehensive income			-	-	(4,671)	115	-	(4,556)	73	(4,483)
Total comprehensive income			-	-	1,864	115	-	1,979	945	2,924
Equity dividends			-	-	(1,623)	-	-	(1,623)	(970)	(2,593)
Transfer to retained earnings			-	(35)	35	-	-	-	-	-
Share-based payments			-	-	-	-	126	126	-	126
Arising on employee share schemes			-	-	348	-	-	348	-	348
			-	(35)	(1,240)	-	126	(1,149)	(970)	(2,119)
At 30 June 2010 (unaudited)			13,424	3,314	156,824	2,714	(476)	175,800	1,205	177,005

 

CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

For the half year ended 30 June 2010

 

				Half year ended 30 June 2010 Unaudited £'000	Half year ended 30 June 2009 Unaudited £'000	Year ended 31 December 2009 Audited £'000
Cash flows from operating activities
Profit (loss) from operations				10,050	(19,782)	(10,044)
Adjustments for non-cash items:
Depreciation of property, plant and equipment				1,529	1,716	3,327
Property impairment				-	106	106
Goodwill impairment				102	102	203
Amortisation of PFI asset				559	547	1,098
Share-based payment expense				348	418	799
Pension scheme charge				(192)	-	1,474
Revaluation (increase) decrease in investment properties				(1,727)	23,585	22,381
Movements in fair value of cash flow hedge				(22)	40	65
Gain on disposal of property, plant and equipment				(387)	(955)	(1,516)
Gain on disposal of investment properties				(2,519)	(74)	(878)
Operating cash flows before movements in working capital				7,741	5,703	17,015
(Increase) decrease in inventories				(2,847)	(247)	3,953
(Increase) decrease in receivables				(3,361)	2,707	4,158
Increase (decrease) in payables				628	(143)	(11,255)
Cash generated from operations				2,161	8,020	13,871
Interest received				144	434	472
Interest paid				(1,010)	(752)	(1,855)
Tax				(2,211)	(103)	(1,425)
Net cash flows from operating activities				(916)	7,599	11,063
Cash flows from investing activities
Purchase of intangible assets				(188)	(115)	(314)
Purchase of property, plant and equipment				(1,390)	(9,460)	(779)
Purchase of investment property				(386)	(85)	(10,159)
Proceeds on disposal of property, plant and equipment				722	2,413	3,844
Proceeds on disposal of investment properties				11,821	1,133	21,773
Net cash flows from investing activities				10,579	(6,114)	14,365
Cash flows from financing activities
(Decrease) increase in borrowings				(7,581)	942	(14,639)
Dividends paid	- ordinary shares			(1,612)	(4,836)	(6,443)
	- non-controlling interests			(970)	(708)	(1,775)
	- preference			(11)	(10)	(21)
Net cash flows from financing activities				(10,174)	(4,612)	(22,878)
Net (decrease) increase in cash and cash equivalents				(511)	(3,127)	2,550
Net cash and cash equivalents at beginning of period				4,305	1,755	1,755
Net cash and cash equivalents at end of period				3,794	(1,372)	4,305
Analysis of net debt:
Cash and cash equivalents				3,867	3,334	4,305
Bank overdrafts				(73)	(4,706)	-
Net cash and cash equivalents				3,794	(1,372)	4,305
Bank loans				(28,813)	(51,975)	(36,394)
Net debt				(25,019)	(53,347)	(32,089)

 

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

For the half year ended 30 June 2010

 

1. GENERAL INFORMATION

The financial information set out above does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006 and is unaudited. The Financial Statements for the year ended 31 December 2009, which were prepared under IFRS as adopted by the European Union, have been reported on by the Group's auditors and delivered to the Registrar of Companies. The Independent Auditors' Report was unqualified and did not contain any statement under Section 498 of the Companies Act 2006.

 

2. Basis of preparation and accounting policies

The half-yearly financial information has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34 'Interim Financial Reporting' as adopted by the European Union.

 

The half-yearly financial information has been prepared using the same accounting policies and methods of computation as compared with the annual Financial Statements for the year ended 31 December 2009, except for as described below.

 

The following standards and interpretations are mandatory for the first time for the financial year ending 31 December 2010:

 

		Effective from
IFRIC 9 & IAS 39 (amended 2009)	'Embedded derivatives'	30 June 2009
IFRIC 15 (issued 2008)	'Agreements for Construction of Real Estate'	1 January 2010
IFRIC 16 (issued 2008)	'Hedges of a Net Investment in a Foreign Operation'	1 July 2009
IFRIC 17 (issued 2008)	'Distributions of Non-cash Assets to Owners'	1 July 2009
IFRIC 18 (issued 2009)	'Transfers of assets from customers'	1 July 2009
IAS 17 (amended)	'Leases'	1 January 2010
IAS 27 (revised 2008)	'Consolidated and Separate Financial Statements'	1 July 2009
IAS 39 (amended 2008)	'Financial Instruments: Recognition and Measurement: eligible hedged items'	1 July 2009
IFRS 1 (amended 2008)	'First time adoption of IFRS'	1 July 2009
IFRS 1 (amended 2009)	'Additional exemptions for first-time adopters'	1 January 2010
IFRS 2 (amended 2009)	'Group cash-settled share-based payment transactions'	1 January 2010
IFRS 3 (revised 2008)	'Business Combinations'	1 July 2009

 

The adoption of these standards and interpretations has not had a significant impact on the Group.

 

3. Segment Information

For the purpose of the Board making strategic decisions the Group is currently organised into four business segments: Property investment and development, Land development, Construction and Group overheads and other.

 

	Half year ended 30 June 2010							Half year ended 30 June 2009				Year ended 31 December 2009
		Unaudited							Unaudited				Audited
		Inter-							Inter-				Inter-
	External	segment					External		segment		External		segment
	sales	sales			Total		sales		sales	Total	sales		sales	Total
Revenue	£'000	£'000			£'000		£'000		£'000	£'000	£'000		£'000	£'000
Property investment and development	7,860	157			8,017		21,522		162	21,684	28,386		309	28,695
Land development	4,007	-			4,007		1,595		-	1,595	10,183		-	10,183
Construction	43,209	57			43,266		43,866		5,885	49,751	77,955		6,982	84,937
Group overheads and other	-	277			277		-		296	296	-		574	574
	55,076	491			55,567		66,983		6,343	73,326	116,524		7,865	124,389
Eliminations	-	(491)			(491)		-		(6,343)	(6,343)	-		(7,865)	(7,865)
	55,076	-			55,076		66,983		-	66,983	116,524		-	116,524
RESULT					Half year ended 30 June 2010 Unaudited £'000					Half year ended 30 June 2009 Unaudited £'000				Year ended 31 December 2009 Audited £'000
Property investment and development						8,951				(19,093)				(16,317)
Land development						(466)				(2,442)				(3,149)
Construction						3,507				4,531				16,847
Group overheads and other						(1,962)				(2,778)				(7,460)
Segment result						10,030				(19,782)				(10,079)
Eliminations						20				-				35
Profit (loss) from operations						10,050				(19,782)				(10,044)
Investment income						228				625				803
Finance costs						(1,313)				(1,148)				(2,651)
Profit (loss) before tax						8,965				(20,305)				(11,892)
Tax						(1,558)				5,840				5,926
Profit (loss) for the period						7,407				(14,465)				(5,966)

 

			30 June 2010 Unaudited £'000			30 June 2009 Unaudited £'000						31 December 2009 Audited £'000
Segment assets
Property investment and development			189,511			216,719						196,015
Land development			61,882			59,975						58,030
Construction			30,147			31,177						29,456
Group overheads and other			2,166			3,255						1,922
			283,706			311,126						285,423
Unallocated assets			16,853			13,907						15,437
Total assets			300,559			325,033						300,860
Segment liabilities
Property investment and development			5,462			5,741						6,172
Land development			7,338			10,201						11,451
Construction			43,835			50,950						37,844
Group overheads and other			4,006			3,297						4,243
			60,641			70,189						59,710
Unallocated liabilities			62,913			86,569						64,950
Total liabilities			123,554			156,758						124,660
Total net assets			177,005			168,275						176,200

 

4. EARNINGS PER ORDINARY SHARE

Earnings per ordinary share are calculated on the weighted average number of shares in issue.

 

Diluted earnings per ordinary share are calculated on the weighted average number of shares in issue adjusted for the effects of any dilutive potential ordinary shares.

 

5. DIVIDENDS

	Half year ended 30 June 2010 Unaudited £'000	Half year ended 30 June 2009 Unaudited £'000	Year ended 31 December 2009 Audited £'000
Amounts recognised as distributions to equity holders in year:
Preference dividend on cumulative preference shares	11	10	21
Final dividend for the year ended 31 December 2009 of Nil per share (2008: 3.75p)	-	4,836	4,831
Interim dividend for the year ended 31 December 2009 of 1.25p per share (2008: 1.25p)	-	-	1,612
Second interim dividend for the year ended 31 December 2009 of 1.25p per share	1,612	-	-
	1,623	4,846	6,464

 

An interim dividend amounting to £1,744,672 (2009: £1,612,108) will be paid on 28 October 2010 to shareholders whose names are on the register at the close of business on 8 October 2010. The proposed interim dividend has not been approved at the date of the Consolidated Statement of Financial Position and so has not been included as a liability in these Financial Statements.

 

6. TAX

	Half year ended 30 June 2010 Unaudited £'000	Half year ended 30 June 2009 Unaudited £'000	Year ended 31 December 2009 Audited £'000
Current tax:
UK corporation tax on profits for the year	2,051	684	1,320
Adjustment in respect of earlier years	(672)	-	(266)
Deferred tax	179	(6,524)	(6,980)
	1,558	(5,840)	(5,926)

 

Corporation tax is calculated at 28% (2009: 28%) of the estimated assessable profit (loss) for the year.

 

Deferred tax has been calculated at 28% (2009: 28%), being the rate expected to be applicable at the date the actual tax will arise.

 

A number of changes to the UK Corporation tax system were announced in the June 2010 Budget Statement. The Finance (No. 2) Act 2010, which was substantively enacted on 20 July 2010, includes legislation reducing the main rate of corporation tax from 28% to 27% from 1 April 2011. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 24% by 1 April 2014. The changes had not been substantively enacted at the Statement of financial position date and, therefore, are not included in these Financial Statements.

 

7. INVESTMENT PROPERTY

During the period, the Group disposed of a retail investment at Waterloo Square, South Shields, to Royal London Mutual Insurance Society Limited for £11.5m. Net sales proceeds of £10.1m, compared with the 31 December 2009 valuation of £7.7m, gave rise to a profit on disposal of £2.4m.

 

8. PROVISIONS FOR LIABILITIES AND CHARGES

Since 31 December 2009 the following movements on provisions for liabilities and charges have occurred:

 

The road maintenance provision, which represents management's best estimate of the Group's liability under a five-year rolling programme for the maintenance of the Group's PFI asset, has been increased by £0.7m due to normal operating procedures.

 

The bonds and guarantees provision represented a claim that has been made against the Parent Company, the liability for which is subject to an on demand bond. A call under the bond was made in the period which resulted in £124,000 being utilised with £20,000 being non-utilised and therefore released.

 

Other provisions include:

 

·;	£1.1m in connection with contract liabilities resulting from warranties, which end in late 2010, given on work already completed. This remains unchanged;
·;	£1.2m in connection with a legal case by tenants in one of our investment properties, the outcome of which was favourable and the provision has been released in full during the period; and
·;	£1.0m for liabilities arising on an enhanced benefits pension buyout exercise of which £407,000 has been utilised, £299,000 released as non-utilised and £294,000 remains.

 

9. DEFINED BENEFIT PENSION SCHEME

The assumptions that have been used in the calculations of the defined benefit pension scheme by its actuary were as follows:

 

		30 June 2010 %	30 June 2009 %	31 December  2009 %
Rate of inflation		2.75	2.75	2.75
Rate of general increases in salaries		1.00	3.75	2.75
Rate in increase to pensions in payment liable for Limited Price Indexation		2.65	2.65	2.65
Revaluation of deferred pensions		2.75	2.75	2.75
Liabilities discount rate		5.40	6.30	5.75
Expected rate of return on scheme assets		5.75	5.70	6.17

 

10. KEY RISKS

In common with all organisations the Group faces risks which may affect its performance. These are general in nature and include: obtaining business on competitive terms; retaining key personnel; successful integration of new business streams; and market competition.

 

The Group operates a system of internal control and risk management in order to provide assurance that we are managing risk whilst achieving our business objectives. No system can fully eliminate risk and therefore the understanding of operational risk is central to the management process within Henry Boot. The long-term success of the Group depends on the continual review, assessment and control of the key business risks we face. To enable shareholders to appreciate what the business considers are the main operational risks, they are briefly outlined below:

 

Development - not developing marketable assets for both tenants and the investment market on time and cost effectively. Rising market yields on completion can make development uneconomic. Construction, funding and tenant risk not matched by commensurate returns on development projects.

Land - the inability to source, acquire and promote land would have a detrimental effect on our strategic land bank and income stream. Prices may be affected by changes in Government policy, legislation, planning environment and taxation. A dramatic change in house builder funding sentiment and demand for housing can dramatically change the demand and pricing profile for land.

Investments - identifying and retaining assets which have the best opportunity for long-term rental and capital growth, or conversely selling those assets where capital values have been maximised. This is an ongoing process with regular reviews of the assets and market conditions and must be undertaken dispassionately to achieve best value.

Interest rates - significant upward changes in interest rates affect interest costs, yields and asset prices and reduce demand for commercial and residential property.

Treasury - the lack of readily available funding to either the Company or third parties to undertake property transactions can have a significant impact on the marketplace in which we operate. Due to the difficulties within the banking sector, in 2009 the Group agreed three year facilities with our three banking partners. Detailed cash requirements are forecast up to 15 months in advance and reviewed and revised monthly. Financial instruments are considered where applicable and any short-term positive cash balances are placed on deposit.

Planning - increased complexity, cost and delay in the planning process may slow down the project pipeline. Any significant change in land prices or demand for housing may have a detrimental effect on the supply of land being brought to market by landowners. Changes in Government or Government policy towards planning could impact on the speed of the consent process or the value of sites.

Personnel - the attraction and retention of the highest calibre people with the appropriate experience is crucial to our long-term growth in the highly competitive labour markets in which we work. This risk is reduced as unemployment rises.

Pension - the Group operates a defined benefit pension scheme which has been closed to new members for some time. Whilst the trustees have a prudent approach to the mix of return seeking and fixed interest assets, times of economic instability can have an impact on those asset values with the result that the reported pension deficit increases. Whilst pension schemes are a long-term commitment, regulations require us to respond to deficits in the short term.

Environmental - the Group is inextricably linked to the property sector and environmental considerations are paramount to our success. Therefore our interaction with the environment and the agencies that have an over-arching responsibility has got to be positive at all times in order to achieve best value. Stricter environmental legislation will increase development and house building costs and therefore could impact on profitability if capital and land values do not increase to reflect this more efficient energy performance.

Economic - we operate solely in the UK and are closely allied to the real estate, house building and construction sectors. A strong economy with strong tenant demand is vital to create long-term growth in rental and asset values, whilst at the same time creating a healthy market for the construction and plant hire activities. The much published reductions in public spending could have an impact on this side of our business.

Counterparty - we depend on the stability of our customers, suppliers, funders and development partners to achieve success. In recessionary periods we pay particular attention to the financial strength of counterparties before contracting so as to mitigate financial exposure.

 

11. APPROVAL

At the Board meeting on 25 August 2010 the Directors formally approved the issue of these statements which have not been reviewed by the auditors.

 

RESPONSIBILITY STATEMENTS OF THE DIRECTORS

 

We confirm that to the best of our knowledge:

 

a)	the unaudited Condensed Consolidated Financial Statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union;
b)	the Half-yearly report includes a fair review of the information required by Section DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and
c)	the Half-yearly report includes a fair review of the information required by Section DTR 4.2.8R (disclosure of related parties transactions and changes therein).

 

The Directors of Henry Boot PLC are listed in the Henry Boot PLC Annual Report for 31 December 2009, with the exception of D Greaves who retired on 30 June 2010. A list of current Directors is maintained on the Henry Boot PLC Group website: www.henryboot.co.uk.

 

On behalf of the Board

 

 

 

 

 

E J BOOT Director 25 August 2010

J T SUTCLIFFE Director 25 August 2010

 

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